Barclays in tax row over avoiding paying millions of pounds in a deal with Accenture

LONDON: Under probe for rigging interest rates, Barclays bank has now been embroiled in a tax row that allegedly involved avoiding paying millions of pounds in tax in a deal in which it outsourced some of its computer services work to India and the Philippines.

The Sunday Times reported that Barclays agreed a 450 million pounds deal with consultancy Accenture in 2004 to provide IT services using UK and overseas staff.

Under the deal, about 1,400 staff in Britain were transferred to the consultancy.

Quoting an unnamed whistleblower, the report said that these staff were then "seconded" back to Barclays without moving from their desks.

The whistleblower claimed that the scheme was partly devised to help Barclays avoid paying Value Added Tax (VAT) on the employees in the outsourcing deal, which would have cost about 4.6 million pounds a year.

The whistleblower told the weekly: "It was calibrated in this way for Barclays to avoid VAT. It disrupted the lives of all the employees involved who were worried about redundancy."

A Barclays spokesman said the outsourcing deal with Accenture was not devised to avoid VAT.

The bank confirmed that it initially believed VAT would not be payable on the seconded staff, but was subsequently challenged by the tax office, the report added.

Accenture said the tax office had successfully challenged the scheme in 2006.

The consultancy paid all the VAT for the two-year period in question -- 9.2 million pounds -- which would have in turn been charged to Barclays.

It said the scheme had no impact on "the way the employees were treated".

The report said that VAT would typically be paid on staff services provided under an outsourcing deal.

However, by seconding the staff back to the bank it was hoped the VAT bill could be avoided.

The scheme was initially approved by tax authorities, but the report claimed that tax inspectors were not provided with full information.

The tax office subsequently argued that Barclays should be liable for the VAT payment, the report added.